Tyson Foods cooperating in US probe of chicken price-fixing

By Brent Kendall and Jacob Bunge

Tyson Foods Inc., the leading U.S. chicken producer, said it is cooperating in a Justice Department price-fixing investigation under a leniency program that will allow the company to avoid criminal prosecution in exchange for aiding in the continuing probe of other poultry suppliers.

After receiving a grand jury subpoena in April 2019, Tyson discovered that some of its employees were implicated in the alleged scheme. The company said it approached the Justice Department, disclosing its own actions and seeking leniency.

"Tyson took appropriate actions to address the internal issues and has been fully cooperating with the DOJ as part of its application for leniency under the DOJ's Corporate Leniency Program," Tyson said in a statement provided to The Wall Street Journal.

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A Justice Department spokeswoman declined to comment.

Tyson's public acknowledgment of its role in the investigation comes a week after four chicken-industry executives, including employees of Pilgrim's Pride Corp. and Claxton Poultry Farms, were indicted on charges of price fixing and bid rigging. The Justice Department alleged chicken company executives and employees for years exchanged details of their own pricing and that of competitors via phone calls and text messages, at the same time that they were negotiating supply deals with restaurants.

The defendants include Pilgrim's Pride Chief Executive Jayson Penn. All have pleaded not guilty, and a jury trial is scheduled to begin in August. A lawyer for Mr. Penn said in court last week that the executive expects to be fully vindicated. Colorado-based Pilgrim's is cooperating with the Justice Department investigation, the company has said. Claxton called the allegations meritless and intends to contest them, a spokesman said last week.

Under the Justice Department's antitrust leniency program, the first company to self-report its participation in a price-fixing conspiracy can avoid criminal convictions, fines and prison time for its cooperating employees. A cooperating company also can secure limits on monetary damages it might have to pay in private civil litigation covering the same conduct. The company must admit to a criminal violation of antitrust laws, terminate the offending conduct, take remedial action and cooperate fully with the department.

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Tyson said it immediately reported the internal conduct it uncovered. "Our swift and decisive actions demonstrate our steadfast commitment to treating suppliers, customers and partners with integrity and to fostering a free and fair competitive environment that not only benefits consumers but makes Tyson Foods better," the company said in the statement.

Tyson's cooperation deal with the Justice Department could ease some investor concern as the $213 billion U.S. meat industry faces growing scrutiny from federal agencies, as well as civil lawsuits filed by supermarket chains, restaurants and consumers. The U.S. Department of Agriculture is investigating meatpackers' cattle-purchasing practices, while the Justice Department has issued civil subpoenas to beef and pork producers, following pressure from livestock producers and some state attorneys general.

Tyson, based in Springdale, Ark., is the biggest U.S. meat processor by sales, producing about one in every five pounds of chicken, beef and pork in the country. In recent years the company has been building a packaged-foods business by acquiring well-known consumer brands including Jimmy Dean sausages and Ball Park hot dogs.

Other major chicken processors, including Pilgrim's, Sanderson Farms Inc. and Perdue Farms Inc., disclosed last year that they had received subpoenas in the Justice Department's criminal investigation into chicken pricing.

The extent of Tyson's conduct in the alleged price-fixing couldn't be learned, but there are some clues from last week's indictment.

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Tyson didn't appear by name in the indictment, but people familiar with the charges said the company is identified as "Supplier-3" in court papers, one of several chicken suppliers whose employees allegedly shared with one another details on pricing and bids.

Tyson, as Supplier-3, appears in the charges as both an alleged participant in discussions with competitors and an object of scorn at other times for selling what a rival described as "cheap chicken."

According to the indictment, after a purchasing cooperative sought a discount on chicken on March 25, 2015, an employee of the company identified as Tyson the following day called and spoke to employees at Pilgrim's, Claxton and another chicken company, with some of the discussions lasting only about 30 seconds.

"I have talked to a couple company's [sic] and they are thinking .02lb for September," the Tyson employee that day told a Tyson manager, according to the indictment, referring to a potential per-pound discount sought on chicken prices. "Only bad thing is everyone else does it, it will be hard not to do it." The employee had worked for Tyson since 1988 and the manager since 2009, the Justice Department said in the indictment.

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One day later Tyson agreed to offer that discount, and the Tyson employee later that morning communicated with employees of Claxton and another, unnamed chicken company, the Justice Department alleged. Pilgrim's Mr. Penn on March 31, 2015, was told by another Pilgrim's employee that Tyson, Claxton and other chicken companies had agreed to the discount, the indictment alleged, and on April 1, Mr. Penn approved the same discount.

The indictment also included what it alleged were several discussions of Tyson by Mr. Penn and other officials at Pilgrim's, which is the second-largest U.S. chicken company by sales. In November 2014, according to the indictment, Mr. Penn wrote in emails to one or more coworkers that Pilgrim's should charge Tyson a high price for chicken. At the time, Tyson was trying to buy chicken from Pilgrim's to cover a shortfall in Tyson's own production, according to the Justice Department.

"They have been adding market share and still trying to do -- selling cheap chicken and being short," Mr. Penn said of Tyson, according to the indictment. "We are enabling the town drunk by giving him beer for Thanksgiving instead of walking him into an AA meeting."